About 1 in 5 Gen Zers, or 22 percent, say a lack of affordable starter homes is a barrier to homeownership, according to a new report. Some believe that fix-top homes may be the answer to the problem.
A fixer-upper is an existing home that it needs different degrees maintenance work and is typically offered at a low purchase price, as defined by Redfin.
More than half, 57% of Gen Zers surveyed said they would be willing to make an offer on a fixer-upper, according in a new report by Clever Real Estate. The site surveyed 1,000 Gen Z adults 18 and older. 126 of the total were homeowners.
However, some of those who took this route are already reconsidering their decisions. At this point, of the 40% of Gen Z homeowners who actually bought a fixer-upper, about 27% regret it, according to the report.
Given the survey’s small homeowner base, it’s hard to say how regrets might play out on a larger scale. But experts say it’s not unusual for buyers of such properties to feel overwhelmed.
“A lot of them are first-time buyers; they don’t really know the true cost of home ownership and how these renovations and repairs can really add up,” said Jaime Dunaway-Seale, data writer at Clever Real Estate.
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Buying a home with a fix-up can mean savings in the short term, but would-be buyers need to consider renovation costs as well as the home’s current functionality, said Marine Sargsyan, staff economist at Houzz, a home renovation and design site. For example, if your new home does not have a usable bathroom, this may delay your ability to move.
“Functionality above all else. Everything you have in your home has to work,” he said. “If not, then see how much it will cost you to replace [it].”
“New buyers have to make compromises”
With home ownership affordability out of reach for many Americans, a fix-up home could mean short-term savings.
The median cost of a home fixer-upper is about $283,000, according in a May report from StorageCafe, which analyzed data from its sister division, Point2. That’s about 29% less than a move-in ready home, saving buyers about $117,000, according to StorageCafe.
“New buyers have to make compromises because home prices are so expensive,” said Susan Wachter, professor of real estate and economics at The Wharton School of the University of Pennsylvania.
Some Gen Z buyers are still willing to buy fasteners with significant damage or outdated features that pose major risks. More than half, 56% of Gen Zers in the Clever Real Estate survey said they would buy a home with asbestosa metal fiber that can increase the risk of lung disease if exposed to it.
When shopping for homes that have been repaired, make sure the home is safe and livable enough to not cause health and safety issues, Sarkisian explained.
“Make sure there’s no toxin in the house,” she said.
It doesn’t take extreme wear to make the top of the mount significant repair costs. Many of the existing homes in the US were built decades ago, according in the 2022 American Community Survey from the US Census Bureau. The survey found that the average age of owner-occupied homes in the US is about 40 years.
“Homebuyers have to make a trade-off along the way, and often it’s the age or the condition of the home,” Jessica Lautz, deputy chief economist at the National Association of Realtors, recently told CNBC.
Functionality above all else. Anything you have in your home should work.
Marin Sarkisian
staff economist at Houzz, a home renovation and design website
About 51% of surveyed homeowners spent $25,000 or more on home renovation projects in 2023, up from 44% in 2021; according in the Houzz & Home 2024 US study. Houzz surveyed 33,830 homeowners ages 18 and older from January 19th to February 27th.
While cash from savings is still the most common way homeowners finance renovation projects, at 83%, credit card use has increased, Houzz were found. About 37% of homeowners paid for their repair projects with credit cards, up from 28% in 2022.
Five things to look for in a fixer-upper home
If you’re considering a top-up, ask your home seller or real estate agent detailed questions about the property, such as when the house was built, experts say. If you make it all the way through the home inspection process, call a home inspector who can help you gather the issues with the home.
Here are five key things to look out for if you’re considering buying a modern home:
- Roof: If it’s a leaky roof, you need to figure out how much it will cost to fix it, Sarkisian said. Roof repairs can be significant and you also need to consider the damage that leaks may have caused to the interior of the home. The average cost of roof upgrades hovers around $12,000, according to Houzz.
- Plumbing: Find out the condition of the home’s pipes and plumbing, including where they are, where they go and when they were last upgraded, Sarkisian said. Older pipes are more likely to break or crack if they were installed before 1980, when cast iron or clay were standard materials, according to Short Elliott Hendrickson, Inc., a construction company based in St. Paul, Minnesota.
- Electricity: Find out if the home’s wiring is in good shape and when it was last updated. Old houses often lack security devices such as earth fault circuit breakers. Taking a look at the electrical panel can also give you clues about the home’s wiring system, according to Lippolis Electric Inc., an electrical contracting company in Pawling, New York. The average spending on electrical system upgrades increased to $2,000 in 2023 from $1,800 in 2020, Houzz found. “It’s important to understand the total capacity of your electrical because you don’t want to plug in too many things and then cause an outage for yourself,” Sarkisian said. “It’s also a great appreciation.”
- Walls and stairs: Make sure the walls are secure, Sarkisian said. If there are cracks in the walls and ceilings, uneven floors and difficulty opening and closing doors may indicate underlying problems, according at Perma Pier, a foundation repair company in Texas. And if there are stairs in the house, make sure they’re safe to walk on, Sarkisian said.
- Total land: Understand the total land the house is built on, he said. Look for evidence that problems with the home are coming from the surrounding land, such as signs that the basement is flooded or cracked. “Will there be any surprise if it rains a lot, especially with the weather changes in recent years?” he said.
